Original from WP

www.washingtonpost.com

Trumpian math: Two nonsense numbers that don’t add up

Glenn Kessler

7 - 9 minutes

“On trade and other things, we’re doing great. We’re taking in billions and billions of dollars. … We were losing $2 billion a day. … This is the biggest deal ever made. Now we’re making $3 billion a day.”

A few days before the president made these comments, we gave Four Pinocchios to Peter Navarro, the president’s senior counselor, for claiming that Trump’s tariffs would raise $600 billion a year, or $6 trillion over 10 years. We showed that Navarro appeared to have assumed that a 20 percent tariff on $3 trillion of imports would result in a bonanza — without considering the effects of people changing their buying habits when tariffs increase, countries retaliating and the subsequent impact on other revenue sources.

Outside organizations, such as the Tax Foundation and the Budget Lab at Yale University, used sophisticated models to estimate that the overall tariff revenue would end up being closer to $2.4 trillion, or about $660 million a day.

But it turns out that Navarro’s math, while nonsensical, is even more conservative than Trump’s math. Navarro estimated a little over $1.6 billion a day. Trump almost doubles that — to $3 billion a day.

And how was Joe Biden losing $2 billion a day? Best we can tell, Trump was talking about something completely different — and equally wrong. (The White House did not respond to questions.)

The Facts

Trump’s tariffs are beginning to kick in — though he suspended many worldwide increases a couple of weeks ago to allow for country-to-country negotiations — and he spoke in the present tense. (“Now we’re making $3 billion a day.”)

As we regularly remind readers, economists agree that tariffs — essentially a tax on domestic consumption — are paid by importers, such as U.S. companies, which in turn pass on most or all of the costs to consumers or producers who may use imported materials in their products. As a matter of demand and supply elasticities, overseas producers will pay part of the tax if there are fewer goods sold to the United States. Domestic producers in effect get a subsidy because they can raise their prices to the level imposed on importers.

So Trump is wrong to suggest this money is being collected by countries. Americans will face higher prices for goods, which is why just about every economist predicts inflation will increase, not slow down as previously predicted. Put simply, this is a massive tax increase on consumers.

In any case, both the Treasury Department and the data released by Customs and Border Protection show Trump is way off the mark.

In early February, Trump said he would impose 25 percent tariffs on Canada and Mexico, and 10 percent tariffs on China. In March he raised the tariffs on China to 20 percent and implemented the Mexico/Canada tariffs. When China imposed its own tariffs on American goods, he raised them by an additional 34 percent on April 2, and then again on April 4 — to tariffs of 145 percent. (China’s tariffs on U.S. goods now stand at 125 percent.)

The monthly Treasury report details how much in customs duties was received in March, when tariffs were up to 20 percent on China and 25 percent on Mexico and Canada. The total raised that month? $8.16 billion, or $263 million a day.

To put that in context, Biden collected $76 billion in customs duties in fiscal 2024, or almost $210 million a day.

Of course, the big increases on China did not happen until April. The daily Treasury report combines customs duties with some other excise taxes, so we won’t have as clear a picture until the monthly report for April is released. But we will be generous and assume all of the collections were customs duties. On April 15, the day after Trump spoke, customs and excise taxes were $250 million. On April 18, this past Friday, the government collected $323 million. That’s an increase, perhaps reflecting some impact from his tariff hike, but it’s still almost one-tenth of Trump’s $3 billion claim.

Separately, CBP has a page that lists every dollar raised under Trump’s International Emergency Economic Powers Act (IEEPA) declaration. That shows $5.27 billion has been raised on Chinese goods, $2.38 billion on Mexican goods and $923 million on Canadian goods. That adds up to $8.57 billion.

But it’s unclear what time period this covers. The webpage suggests this data is as of Feb. 19, but the Wayback Machine shows this date has been listed since even before the IEEPA revenue was added. So it doesn’t make much sense to assume this was collected just in the 15 days the IEEPA tariffs were placed into effect. The CBP media office did not respond to requests for an explanation. (Before Trump took office a second time and starting purging staff across the government, this page was updated weekly with a new date.)

Even if we generously assumed that the $8.57 billion was actually collected over 15 days, that still would only be $566 million a day — again, much less than $3 billion a day.

As for Biden “losing $2 billion” a day, Trump is changing metrics. He appears to be referring to the daily average of the trade deficit. The goods and service deficit was nearly $920 billion in 2024, according to the Commerce Department, or about $2.5 billion a day.

As we’ve been reminding people since 2015, Trump frequently says the United States is “losing money” when there is a trade deficit, but that reflects a fundamental misunderstanding. A trade deficit simply means that people in one country are buying more goods from another country than people in the second country are buying from the first country.

Americans want to buy these products from overseas, either because of quality or price (or in the case of coffee, because it’s not produced in the United States). Trump’s trade war will raise the cost of those products for Americans. Perhaps that would reduce the purchases of those goods and thus reduce the trade deficit, but that would not mean the United States would “gain” money that had been lost.

Trade can lead to job losses — as well as job gains. A domestic widget-maker might lose market share and cut staff if lower-cost imports undercut prices. But exports also generate jobs, which is why U.S. presidents, at least before Trump, generally have sought to lower tariffs.

The trade-deficit numbers are also shaped by underlying factors, such as an imbalance between a country’s savings and investment rates. A bigger federal budget deficit — caused by, say, a large tax cut or more government spending — can boost the trade deficit because the country saves less and borrows more from abroad. The booming economy can also be at fault — the more money people have, the more they can spend on goods from overseas. And a strong currency means those foreign goods are cheaper for a particular country and its goods are more expensive for foreign consumers.

If Americans stop buying Chinese goods because prices are too high — and vice versa — and if the value of the dollar keeps plunging, making overseas goods even more expensive, it’s possible the trade deficit with another country would all but disappear. But this might also trigger a recession, so the cost of this achievement would be high.

The Pinocchio Test

Trump is peddling two nonsense numbers. First, that tariffs are already bringing in $3 billion a day. He’s off by a factor of 10. Second, that Biden was losing $2 billion a day. That reflects a misunderstanding of trade — though with profound consequences.

Trump earns Four Pinocchios.